It seems like some constituency likes the idea of legalizing insider trading so much that they grasp at a variety of straws in an effort to find some analogous place where it would be legal.
But these are very thin reeds.
"Suppose I have a business where I get stuff to sell on a 'don't ask, don't tell basis', that would be totally legal and no one would complain..." sure
"It's just information, information shouldn't be property"
--> Any employer has information they want private. If someone there was no overt law against spilling out one's employer's private information, it would certainly be a condition of employment. And intentionally doing anything that is - against your condition of employment and costs your employer millions of dollars, is going to wind in serious civil trouble. That state has decided to make this criminal also is entirely logical.
If a shop foreman takes money to shut down a factory for a day to benefit a revival, he would be guilty of theft without "shutting down a factory" being an otherwise criminal activity.
The fundamental thing is taking money from someone, which insider trading certainly does. Those who buy a stock on an insider get money - meaning those who sold the stock lose it.
What about a journalist publishing leaked information? In such a case, it is up to the company to stop leaks. People outside the company have no obligation to help them.
> Those who buy a stock on an insider get money - meaning those who sold the stock lose it.
This is definitely not true; those who buy a stock on inside information are buying from people who independently decided it was a good time to sell their stock. Those people are likely, in the counterfactual universe, to sell their stock anyway.
And while a shop foreman might be guilty of theft for shutting down a shop in response to a bribe (I find this a little unlikely, but won't express further opinion than that), the money which changes hands can't be relevant to that, since the theft would be from the factory owner or operator, while the money comes from a completely different source.
This definitely is true. If the other party had the same information they would have sold or bought at a different price point. (or maybe not at all+) That has to be because that's the attraction of insider trading, I know something that will cause you to misprice the trade in a way that benefits the insider trader.
+ Consider the person trading in insider information, namely that Cogswell's Cosmic Cogs has agreed to buy Spacely Space Sprockets at $12/share. Someone with stock in Spacely Space Sprockets would likely chose not to sell at the current market rate of $9.25/share if they knew that.
> If the other party had the same information they would have sold or bought at a different price point. (or maybe not at all+) That has to be because that's the attraction of insider trading
This doesn't follow at all. Trades happen all the time between people with the same information. Under your theory, that's impossible.
It's also not particularly relevant to the main point. The idea of banning insider trading isn't to reflect inside knowledge in the price instantly -- that would be accomplished by encouraging insider trading. The idea is to prevent people with inside knowledge from trading. People who sell to someone trading on inside knowledge get a little bit more money (due to higher demand) than they otherwise would have. They miss out on gains that the person with inside knowledge predicted, but that they also miss in the relevant counterfactual (when they sell to someone else with no inside knowledge).
A few end up selling when, in the world without the insider, they wouldn't have. Those people can't be identified and quite plausibly realize the same gain under either scenario, for example, if they have a standing order to sell at X price.
Look at what https://news.ycombinator.com/item?id=10488948 wrote. The laws against insider trading aren't there to protect one market participant from another, they are there to protect a company from its employees.
But these are very thin reeds.
"Suppose I have a business where I get stuff to sell on a 'don't ask, don't tell basis', that would be totally legal and no one would complain..." sure
"It's just information, information shouldn't be property"
--> Any employer has information they want private. If someone there was no overt law against spilling out one's employer's private information, it would certainly be a condition of employment. And intentionally doing anything that is - against your condition of employment and costs your employer millions of dollars, is going to wind in serious civil trouble. That state has decided to make this criminal also is entirely logical.
If a shop foreman takes money to shut down a factory for a day to benefit a revival, he would be guilty of theft without "shutting down a factory" being an otherwise criminal activity.
The fundamental thing is taking money from someone, which insider trading certainly does. Those who buy a stock on an insider get money - meaning those who sold the stock lose it.